Gender pay gaps continue to persist in many countries, despite direct intervention by governments, regulators, and companies alike. So why does this apparent gender pay inequality continue? A recent German study examined some of the underlying mechanisms relating to perceptions of fair pay and found that both men and women held the belief that lower pay for women was fair. These beliefs appear to be formed and ‘legitimized’ based on people’s experiences of pay inequality in their own occupations and experiencing more value placed on the input of men in the workplace.
Key Topics: Gender pay gap; Fair compensation; Performance evaluation; Pay inequality
Given the importance of innovation to many companies, the optimal performance of Research & Development employees can be critical to business success. While past research indicates that there is a strong link between monetary rewards and employee performance, this relationship is less clear when it comes to generating employee innovation. A multi-year study in Japan assessed the effect of rewards on the innovation outcomes of Research & Development employees. The study found that, while the relationship differed depending on company size, generally financial reward had a negative impact on employee innovation.
Key Topics: Innovation; Pay-for-performance; Extrinsic reward; R&D employees
In many countries, the pay gap between senior management and employees is on the rise, as is the research interest in this topic. A study of Chinese publicly traded companies examined whether a pay gap serves to motivate employees to increase their performance or whether effort is reduced due to aversion to inequity. The results of the study indicate that there is an inverted-U relationship between a company’s pay gap and their productivity, meaning that depending on a company’s proximity to the optimal pay gap level a pay gap can have positive or negative company performance implications.
Key Topics: Executive compensation; Pay gap; Employee performance; China
Company boards are often faced with the task of determining CEO compensation based on incomplete information regarding their performance and competency. A study of US S&P 500 companies over a 7-year period examined the relationship between CEOs’ use of language that signals their competency and CEO compensation. The findings of this study indicated that the use of such language by CEOs was related to higher levels for CEO compensation, and this relationship was stronger when CEOs were under threat from shareholder activism.
Key Topics: CEO compensation; CEO performance; Symbolic language; Shareholder letters, Shareholder value principle
With companies now having increasingly diverse workforces, a critical question that many face is how to most effectively reward their diverse workforce in order attract, motivate, and retain top talent. A South African study examined the reward preferences of various demographic groups based on characteristics such race, gender, and age. The study results indicated that a ‘one size fits all’ approach to reward management is not effective as employee reward preferences were found to differ across demographic groups.
Key Topics: Total rewards; Demographics; Reward preferences
CEO compensation packages are becoming increasingly standardized, for various reasons, including the growing influence of external bodies on company boards of directors. A study of US CEOs over a 7-year period, which examined the relationship between CEO compensation effectiveness and their tenure, found that the motivation inducing effects of different compensation components differed depending on how long CEOs had been in their role. The results suggest that standardization of CEO compensation is not an optimal compensation strategy for companies to follow.
Key Topics: CEO tenure; CEO compensation; Shareholder returns; Performance-based compensation |
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